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How To Buy Property Overseas

12 Jul
Don't Let Your Friends Talk You Out Of It

Crisis Buy Opportunities And How To Act On Them

The falling markets worldwide are creating crisis buy opportunities for both personal use and investment.

But…invest in a piece of real estate in another country? How do you get started?

First, understand why you’re buying–for investment or for personal use?

The answer may not be clear-cut. And the best case is when you find a piece of real estate in a place where you want to spend time that also holds out the potential for an investment return (in the form of capital appreciation and/or a yield from rental).

State your objectives and exit strategy expectations clearly for yourself and for anyone else buying with you. Every decision you make related to the eventual purchase is affected by the property’s intended use. If you’re buying straight up for profit, every decision is based on the numbers. If you’re buying for personal use, even part-time, you’ll make your choices based on many things, including some that can’t be quantified in a spreadsheet.

Now that you understand why you’re buying, you need to decide where you want to buy what. I’ve been making specific “recession-market” recommendations in recent weeks (and will continue to do so). As you consider them and any others that you identify, think about:

  • The Path of Progress. This is a key factor when buying for investment but important if you’re buying a retirement or second home abroad, as well. What infrastructure improvements are planned? A new airport, new train station, new highway, new hospital, etc., can mean a new universe of potential buyers…which is good news if you’re buying as an investor looking to develop or to flip. These things, though, also translate to better living.
  • Costs of Acquisition. Remember that they go beyond agent commissions. Depending on the market, they can also include: legal fees, notary fees, registration fees, title insurance (we strongly recommend it), and transfer taxes (sometimes called “stamp duty”). In Ireland, for example, stamp duty can be as much as 9% of the purchase price.
  • Carrying Costs. Including: maintenance (a house on the beach requires a lot of it, for example); a caretaker (if you won’t be in residence full-time yourself); property taxes (not every country charges them, and, in some countries, they’re negligible); income taxes (if you’ll be earning rental income); capital gains taxes (when you eventually resell…again, not every country charges them); other local taxes; property management expense (you’ll need a property manager if you intend to rent); rental management expense (separate from property management and, again, necessary unless you’re going to manage all the details of your rental investment yourself…something I don’t advise); and homeowner’s association/building/condo fees.
  • Economic Outlook. Critical if you’re buying for investment, but you don’t want to ignore the market climate even if you’re buying purely for personal use. Markets move up and down…and then up again. At what point in this cycle is the market where you’re thinking about buying right now? In which direction is it moving?
  • Opportunity for Diversification. In terms of market, type of investment, type of property, and currency.

What kind of property should you be shopping for? Again, consider why you’re buying. If it’s for personal use, how much space do you need? If you intend to rent the place out when you’re not using it, understand what rents best on the local market. An apartment or a house? One bedroom or two? Think in terms of cost per square meter when making comparisons.

Where do you want to be? In the heart of downtown…or out in the country? On the coast or overlooking a river? In a gated community, a local neighborhood, or off on your own with undeveloped acres between you and your nearest neighbor? Consider climate, traffic patterns, transportation (where you settle determines whether you’ll need to invest in a car, for example), the convenience factor, and nearby amenities (shopping, restaurants, nightlife, parking, etc.).

Furnished or unfurnished? If you buy unfurnished, where and how will your source furniture?

What’s your budget? Everything follows from this. Be clear on it before you start shopping, and don’t forget to include the costs of closing, attorney review, other due diligence, and title insurance.

Lief Simon